Carbon pricing in China

June 19, 2013

Taking inspiration from Australia and other nations around the world who have implemented carbon pricing mechanisms, China has launched its pilot program.

Its first carbon emissions trading scheme will run in the business boomtown of Shenzhen, with its large population and economic output of over $150 billion it's a big carbon polluter with great potential for energy savings.

Around 630 industrial companies are likely to be affected in this trading scheme, with 38 per cent of the city's greenhouse gas emissions coming from these companies - reducing carbon intensity by 21 per cent on 2010's levels by the year 2015.

Once the Shenzhen trading scheme has been established, other cities will be included, for example Beijing, Tianjin and Shanghai. A national scheme is likely to be implemented after the year 2015 when the program has found its feet.

"China's plans to expand these pilot schemes into a nation-wide trading scheme will add to the strong growth of global carbon markets," said Greg Combet, Australian minister for climate change, industry and innovation.

"China's actions show that the world's largest greenhouse gas emitter and Australia's largest trading partner is serious about cutting emissions at the lowest cost through a market mechanism."

China is expected to soon represent the equivalent of the world's second largest emissions trading market in the world, which would be larger than California, Australia and New Zealand's markets combined.

This year, Chinese officials have been working closely with Australia to gain knowledge and insight into how Australia operates its own carbon market. In April, prime minister Julia Gillard announced that China and Australia had agreed to new arrangements in order to strengthen their carbon collaboration.

Mr Combet's Chinese counterpart, vice chairman Xie Zhenhua met with representatives from the Climate Change Authority, Clean Energy Regulator and the Climate Commission as well as government officials during a visit to Australia where knowledge and ideas on carbon pricing were shared.

Australian carbon emission trading experts have been meeting regularly with those planning the Chinese model, to support its development.

Determinations from groups such as the Queensland Competition Authority (QCA) have stated that the carbon pricing mechanism isn't a major driver for rising electricity prices in Australia, but instead that price rises have been driven largely because of the need to upgrade network transmission infrastructure due to the effects of ageing and demand.